Some housing bubble news from Wall Street to Washington. "Technical Olympic USA Inc., a homebuilder operating in 10 states, on Monday said it expects combined sales orders in the second quarter to decline sharply on lower demand, higher cancellations and competitive pressure. The company forecast combined sales orders, which include consolidated results and unconsolidated joint ventures, to be down 25 percent to 40 percent from the second quarter last year."

"'We are experiencing a more challenging housing market, characterized by higher inventory levels, softening demand, and increased competition,' said Antonio Mon, CEO. 'We expect these conditions to continue to impact most of our markets for at least the remainder of 2006.'"

"Shares of planned community developer Levitt Corp. and homebuilders fell Monday following an analyst downgrade on Standard Pacific Corp. 'What the industry is going through appears to be much more brutal than most had anticipated even just a few short months ago,' wrote AG Edwards analyst Gregory Gieber. 'Last year, our view was that it would be a soft landing, but as 2006 started to roll forward, our concerns grew and we abandoned the soft-landing view.'"

"Continuing a wave of layoffs, Washington Mutual Inc. will close its Austin, Texas, call center by 2007, a move that affects more than 200 employees, media reports said."

From Paul Muolo. "Insurance giant American International Group's residential division, American General Financial Services of Indiana, is making mortgage news. About two weeks ago AGFS shuttered its correspondent division. One of its key products was a 100% loan-to-value ratio prime mortgage, said one executive."

"Former OFHEO chief Armando Falcon Jr. said Fannie Mae officials pulled a 'Keating Five' in their attempt to discredit his investigation of the mortgage giant. In a speech last week, Mr. Falcon said the GSE's behavior reminded him of the K5 scandal of the late 1980s when five U.S. senators pressured thrift regulators to go easy on his rogue S&L."

"In the Fannie saga, the K5 role was played by Sen. Christopher Bond, R-Mo. As the chairman of VA-HUD appropriations subcommittee, Sen. Bond included language in OFHEO's $60 million budget that penalized the agency if Mr. Falcon remained at the helm. Why did Bond do this? Because Fannie executives asked him to. Did Sen. Bond receive campaign donations from Fannie officials? Are the Mets in first place? One of Bond's donors was current Fannie CEO Daniel Mudd."

From Business Week. "You might think there couldn't be any more bad news about Fannie Mae, the mortgage-finance giant accused of manipulating earnings and defrauding investors. But additional disheartening revelations could be on the way as regulators focus on the major Wall Street firms and other advisers that gobbled up Fannie business and allegedly aided in a $10.8 billion accounting fiasco."

"SEC staff members are looking into deals in which Goldman Sachs Group, among others, allegedly helped Fannie rearrange earnings to maintain the appearance of steady profit growth, according to people familiar with the inquiries. Investigators also are scrutinizing KPMG, which, as Fannie's outside auditor, approved financial statements since deemed misleading. And the SEC staff is examining deals designed by Lehman Brothers Inc. and later executed by KPMG that the Internal Revenue Service has determined improperly deferred taxes."

"The list goes on. Referring to one arrangement that could come back to haunt insurer Radian Group Inc., a Fannie official wrote in a Jan. 9, 2002, internal e-mail: 'I am terrified of the negative public-relations aspects of a disclosure of a transaction like this.'"

"Veteran observers of corporate excess say the Fannie saga is unfolding according to script. 'When a company has engaged in wrongful conduct, the inquiry [inevitably turns to] who knew about it, who could have prevented it, who facilitated it,' says former SEC Chairman Harvey Pitt."

And one consultant is down on the sector. "The speculative housing craze is crashing from its own excesses, not Federal Reserve action."

"Inventories since last year have jumped 91% in Boston, 236% in Miami and 149% in Los Angeles. Asking prices have been cut on one-third of listings in Boston, San Diego, Sacramento, Los Angeles and Miami."

"Nationwide median prices will probably fall at least 20% before the break is over. It will take a 35% fall to return prices to their long-run link to the Consumer Price Index; markets overshoot on the downside as well as the up."